Blogging on liberty, capitalism, reason, international affairs and foreign policy, from a distinctly libertarian and objectivist perspective

Friday, February 27, 2009

Jobs summit outcomes?

I agree with most of what Not PC has already suggested here, here and here, as an alternative view to the Jobs Summit. These are:- Government should get out of the way;- Government should resist pressures for protectionism (one positive thing it COULD do is lobby hard internationally to reboot the Doha Round to make the biggest push for free trade since the 1950s);- Production drives the economy, not consumption. Precious little government does encourages production. As Government spending takes money out of the hands of the productive, there should be further tax cuts. I'd suggest simply dropping company tax to 20%. What better signal to the world to locate to NZ?- Abandon the minimum wage;- Cut government salaries;- Allow malinvestments to be liquidated;- Restrict the Reserve Bank's ability to inflate the currency;and so on.

However, in one respect I DO digress from PC, I do NOT believe all government spending is consumption. It is possible for government to spend money and generate more wealth than it spent. However, this really only happens in two areas:

1. Spending money on capitalising SOEs to expand. A very risky endeavour indeed. Singapore does it well, but you'd question whether NZ governments ever can do it well. Air NZ and Kiwirail being Labour's greatest dud investments.

2. Spending money collected from consumers of a government service to benefit those consumers beyond the cost of the spending. I mean roads. The private sector is almost entirely shut out of providing roads, so government taxes road users and can spend that money on improving roads to reduce delays, wasted fuel, accidents etc. For example, the widening of the highway through Paremata-Plimmerton north of Wellington generated savings in travel time, fuel etc of around $5 for every $1 spent on it. The dangerous side to this is politicians get excited about roads too much, and want to spend money on the ones that DON'T do that. Transmission Gully and the Helen Clark Memorial tunnel (aka Waterview Connection) are examples of this. Japan is littered with such bridges of the sort Henry Hazlitt referred to.

In short, if anyone is advocating spend up on projects, they need a seriously rigorous piece of economic analysis. Will the project really generate wealth based on proven demand, what is the risk contingency on this. If there is a reasonable risk it wont generate at least $2 for each $1 spent over a 20 year period then it isn't worth doing. Sadly the ideas that have come out include the insane idea for a cycleway (although if the government was rational about Kiwirail it mind find it has plenty of corridors for one) and the Green Party's rather predictable favourites.

However, regardless of the economic efficiency of government spending it does not justify it morally. Theft is still theft. I undoubtedly think I can spend your money better than you can, but it hardly justifies me doing so does it?

Not enough women, not enough people of different races. Apparently if you have a vagina or differently coloured skin it means you have different ideas. Those don't come from a brain. If you don't feel represented there, then say so - it isn't because there aren't enough women, Maori, Koreans, blondes, cross-dressers, asthmatics, pianists, vegetarians, balloon fetishists, dancers, nudists or twins - it is about ideas. The truth is that if the summit was full of leftwing women, which would surely cheer many on, the ideas are unlikely to be about getting government out of the way of the productive.

Most of those at the summit were there because it showed they were wanting to work with the government, and because they wanted some booty from the rest of you.

Like I said before, the Fourth Labour Government had an economic summit conference shortly after it was elected, and promptly ignored most of what came out of it. That seems the appropriate precedent.

UPDATE: I see the whingy 23yo unemployed woman who thought the world owed her a living at the Lange Economic Summit Conference, Jane Stevens, retains her Marxist view of the world in the Herald. Given she works for an organisation partly supported by taxpayers and ratepayers, I'm hardly surprised. Shame her passion and commitment didn't teach her that the government produces nothing, and that the free market generates wealth.

5 comments:

Spending money collected from consumers of a government service to benefit those consumers beyond the cost of the spending. I mean roads. The private sector is almost entirely shut out of providing roads, so government taxes road users and can spend that money on improving roads to reduce delays, wasted fuel, accidents etc.

Sure, but the problem with government providing these sorts of services is that they don't have the information to decide on what spending is worthwhile. Cost-benefit analysis is hard.

Indeed, which is why I say that when it does such analysis it has to have a huge margin for error. In other words at least $2 return for every $1. On top of that, unless those paying are those benefiting, it is simply a transfer.

I would have paid money for someone to have stood up at the summit and said "Before we begin can we just get a head count of the numbers of penisnes and vaginas in attendance?...some people are worried about that so lets sooth their concerns..."

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About Me

Life, liberty and the pursuit of happiness. Politics, philosophy and economics from a pro-capitalist, libertarian, objectivist perspective. Born in New Zealand, live in the UK, career has been in transport, telecommunications and infrastructure policy.